Does DR's textile and apparel future lie in Haiti?
Trousers are among the main export products of the Dominican Republic apparel industry
Dominican Republic and Haiti: two countries, each with 10m inhabitants and situated on the same island (Hispaniola), yet worlds apart when it comes to per capita income, human development, political stability and sustainability. The differences extend to their textile and apparel industries too, as Jozef De Coster finds out.
Haiti has no textile industry and its apparel industry mainly focuses on assembly. Dominican Republic (DR) has a vertical textile/apparel industry, though only for knits.
And its future does not look bright unless it invests in developing synergies with Haiti, whose own growth depends on the success of the American HOPE (Haitian Hemispheric Opportunity through Partnership Engagement) and HELP (Haitian Economic Lift Program) Acts.
"Our textile and apparel industry has changed dramatically over the last six years," explains José Torres, executive vice-president of the Dominican Free Zone Association Adozona.
"We feared that the ending of the Multi-Fibre Arrangement (MFA) at the end of 2004 could cost the sector 30,000-40,000 jobs. We actually lost 60,000-70,000 jobs."
In DR, all textile and apparel companies with export ambitions operate from 47 Free Zones. In 2009, 131 textile and apparel companies employed 41,285 people. Exports of textiles and apparel amounted to US$939m, just 25% of total exports from the Free Zones.
A decade's difference
Things were very different ten years ago. In 2000, the Dominican Free Zones provided 145,000 apparel jobs and sector exports reached US$2.5bn.
But a series of events brought to light the industry's lack of international competitiveness: the Dominican peso devaluation (2003-04); the lifting of MFA textile quotas (2005); and the implementation of the DR-CAFTA (Dominican Republic - Central American Free Trade Agreement) with the US (signed in 2004).
More than 55% of the DR's apparel exports were in three categories where quotas were the main constraint on shipments from China, Hong Kong and India: cotton trousers, cotton underwear and knit shirts.
In particular, DR's important trousers industry was badly affected by the end of the MFA. José Torres explains: "DR doesn't have a woven fabrics industry. In order to enter the US market duty-free, we had to respect the rules of origin and to use American fabrics which were expensive and increasingly difficult to find."
On the whole, the DR-CAFTA agreement, which was meant to boost Central American and DR apparel exports to US, as well as US exports of fabrics to the other parties in the agreement, has not helped DR.
On 17 November 2010, the President of the Association of Dominican Industries (AIRD) publicly denounced "the free trade agreements which have brought poverty to DR," particularly referring to the rising DR trade deficit with the Central American countries.
Ebell De Castro, head of the 'Economic Analysis and Competitiveness' division of the National Free Zones Council, is optimistic the slight increase in the sector's 2010 employment and export figures marks a turning point.
During the first three-quarters of 2010, DR apparel exports to the US increased by 1.37% to US$466m.
"I think that in 2009 we reached the bottom and that our sector strategy based on full package, the development of design and other advanced capabilities, and the development of a network of international suppliers, has made us more competitive," De Castro says.He points out that not only local companies but also large international apparel groups make use of the Dominican Free Zones.
In 2009, just 26.4% of accumulated investment in the textile and apparel industry in the Free Zones originated from DR. The US is by far the biggest apparel investor (52.7% of total accumulated investment), followed by Canada (17.1%) and Korea (2.1%).It's not difficult to guess the main foreign investors in the Dominican Free Zones: Hanesbrands (US), Gildan (Canada) and Willbes (Korea). Just like the leading Dominican apparel company Grupo M, these three foreign companies have vertical facilities (knitting) in DR and sewing lines (and/or subcontractors) in Haiti.José Torres is cautious when it comes to the growth potential of DR-Haiti apparel co- production.
"Even for large multinational groups it's difficult being successful in Haiti," he says. Currently, the only real success in the field of DR-Haiti co-production is Codevi, Grupo M's sewing project in Haiti, just at the border with Dominican Republic.
"Will the international community be able to create a safe business climate in Haiti? If so, Dominican textile companies are ready to provide the needed know-how to Haiti and to invest there."
An interactive databank with intelligence on the major apparel sourcing countries
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